Bob Truncali, of DeVry College, left, talks with job seeker James Echeverry, of Queens, at a career fair May 13 in New York. Employers added 217,000 jobs in May, putting the economy on pace for an average monthly gain of 214,000 that would make 2014 the best performance in 15 years. (Bloomberg News)

U.S. economy will gain momentum, index says

The index of U.S. leading indicators rose in May for the fourth straight month, showing the economy will gain momentum following a slowdown at the start of 2014.

The Conference Board’s gauge, a measure of the outlook for the next three to six months, increased 0.5 percent after a 0.3 percent gain in April, the New York-based group said Thursday. The median forecast of 44 economists surveyed by Bloomberg called for a 0.6 percent advance.

The Federal Reserve’s pledge to keep its benchmark interest rate low for a “considerable time” after the bond-buying program ends has put a lid on borrowing costs and propelled a rally in stocks that will support the expansion. Nonetheless, industries such as housing that have stalled in recent months will need to rebound to see more marked improvement in growth.

“The economy is in the process of rebounding from a dismal first quarter,” said Robert Dye, chief economist at Comerica Inc. in Dallas, who correctly projected the rise in the index. We’ll “see a moderate-growth economy for the remainder of this year that will allow the Fed to continue to unwind extraordinary policy.”

Estimates in the Bloomberg survey ranged from gains of 0.2 percent to 0.8 percent. The April reading was initially reported as a 0.4 percent increase.

Jobless claims fell 6,000 to 312,000 in the week ended June 14, the Labor Department reported. The total number of people collecting benefits decreased to the lowest level in almost seven years.

The monthly Bloomberg expectations gauge rose to 48.5, the highest since June 2013, from 42.5 the month prior, data Thursday also showed. The weekly Bloomberg Consumer Comfort Index for the period ended June 15 advanced to 37.1, approaching the strongest level of the year.

Seven of the 10 indicators in the Conference Board’s leading gauge contributed to last month’s gain, led by the spread between short- and long-term interest rates and a decrease in jobless claims, Thursday’s report showed.

The index of coincident indicators, a gauge of current economic activity, climbed 0.3 percent in May after a 0.2 percent increase the prior month.

The coincident index tracks payrolls, incomes, sales and production, measures used by the National Bureau of Economic Research to determine the beginning and end of U.S. recessions.

“The economy is finally moving up from a 2 percent growth trend to a more robust expansion,” Ken Goldstein, economist at the Conference Board, said in a statement. “Going forward, the biggest challenge is to sustain the rise in income growth which will drive consumption.”

A measure of lagging indicators rose 0.4 percent after a 0.3 percent advance in April.

Job growth shows the labor market is healing. Employers added 217,000 jobs in May, putting the economy on pace for an average monthly gain of 214,000 that would make 2014 the best performance in 15 years.

The housing market is one area that is still holding back the economy. A drop in building permits last month subtracted 0.2 percentage point from the LEI index, Thursday’s report showed.

The decrease in permits was centered in multifamily units, which tend to be volatile. Applications to begin work on single-family homes, the biggest part of the market, climbed in May to a six-month high, the Commerce Department reported this week.

Acceleration in economic activity has helped the Fed stay on pace to end its unprecedented bond-buying program late this year. The central bank’s policymaking Federal Open Market Committee announced Wednesday a fifth straight $10 billion reduction in monthly asset purchases, to $35 billion.

“The labor market I think has continued to broadly improve,” Fed Chair Janet Yellen said at a press conference at the end of the Fed’s two-day meeting in Washington. “There are many good reasons why we should see a period of sustained growth in excess of the economy’s potential,” including diminished drag from government spending cuts, easing credit conditions, rising home and stock values, an improving global economy and households taking on more debt, she said.